Boeing to Discontinue 2 Douglas Jet Models

Aviation: Firm will end production of MD-80 and MD-90 but offers good forecast for other lines. Fate of plant's workers is undecided.

Three months after taking over operation of Douglas Aircraft Co. in Long Beach, Boeing officially announced Monday that it would shut down the MD-80 and MD-90 product lines in mid-1999, when production of planes already on order is complete.

At the same time, the Seattle aviation giant offered a rosy forecast for the larger MD-11 aircraft and said the company will spend up to three more months evaluating the future of the MD-95, a new 100-seat plane that is the smallest member of the Boeing family.

The elimination of the MD-80 and MD-90 marks the latest chapter in the long-term decline of its predecessor, the venerable DC-9, and the planes' creator, Douglas Aircraft. The DC-9 was once the mainstay of many commercial airlines, but its descendants were overtaken in the marketplace by Boeing's 737.

As Southern California's largest private sector employer--with 10,500 employees in Long Beach alone--Boeing's decision could have a dramatic effect on the local economy. In addition, scores of other Southland companies that supply aircraft parts are directly dependent on Boeing's decision. But the specific effect remains unclear because Boeing has not fully decided the fate of the plant's workers and whether new programs would be moved to Douglas facilities.

Ron Woodard, president of Boeing Commercial Airplane Group, said there are no immediate plans for layoffs at the Long Beach plant, where between 30% and 40% of the employees are involved in the MD-80 and MD-90 programs. But he failed to offer any reassurances about their fate after the last of the twin-engine jets rolls off the production line less than two years from now.

"They resolved the future of the airplanes, but not the future of the thousands of workers in Long Beach," said Joseph Campbell, an aerospace analyst with Lehman Bros. in New York.

Although the announcement on MD-80 and MD-90 lines was expected, the larger question of Douglas's long-term future remained unanswered Monday. The ultimate outcome of the Douglas unit--which dates back to 1920--will depend in large part on Boeing's ability to bring down the cost of the MD-95 and sell it to a variety of customers.

Jack Kyser, chief economist of the Los Angeles County Economic Development Corp., said Boeing can't afford to shut down or scale back operations at the Long Beach facility, especially in light of its labor and capacity shortages at its Seattle-area plants in Renton and Everett. Production delays at those facilities forced the world's premiere plane maker to announce a stunning $1.6-billion charge against earnings a week and a half ago.

"Over the long run, it's not going to be that big an impact because you've got a skilled work force in commercial jets, and right now Boeing has a shortage of skilled workers," Kyser said. "They've got a supplier network for this plant, and it meets a lot of their needs."

In Long Beach, Richard Pearson, the newly installed vice president and general manager of what is now called the Douglas Products Division, spent the day speaking with employees individually and in groups about the decision to stop selling the 17-year-old MD-80 and the 4-year-old MD-90. Pearson called a predawn meeting with 150 senior management executives, and fliers announcing the news were handed out to employees as they passed through Douglas' gates at 6 a.m.

"There have been rumors flying on this subject for a long time, and generally people were not surprised by this decision," Pearson said. "They clearly want to know what the next step is, and we're not prepared to give them that. It's not the best answer, but unfortunately we're going to leave them with a little bit of anxiety until probably the end of January."

The best news for Long Beach workers was Woodard's projection that the company could sell more than 300 of its workhorse MD-11 planes over the next 20 years, mostly as freighters.

Prospects for the MD-95--the first of which is in final assembly and is scheduled for a maiden test flight next year--could be equally bright if Boeing can find a way to make the plane more cheaply. So far, AirTran Airlines (formerly ValuJet) is the MD-95's only customer, with an order for 50 planes. Woodard said other airlines are interested in the plane, and analysts agreed that customers would be more willing to place orders if Boeing commits to support it.

If the MD-11 and MD-95 programs thrive, the Douglas unit could operate much like it does today, with increased MD-95 production taking the place of the outgoing MD-80 and MD-90. But Boeing provided little clue about likely alternate scenarios if that doesn't work out.

To succeed, the Long Beach facility would require a substantial capital investment from Seattle to bring its equipment up to Boeing standards--but first Douglas will have to prove it is worth the money.